· FOB Asia Group II base oils prices hold unusually firm versus US export prices so far in Q3 2025..· Asia’s firm prices make arbitrage to move surplus supplies to Americas hard to work.· Closed arbitrage complicates removal of surplus supplies, raising prospect of build-up of supplies in Asia-Pacific market.· Closed arbitrage contrasts with Q3 2024, when Asia prices fell to steep discount to US export prices.· Steep discount to US export prices facilitated flow of shipments to Americas and removal of surplus supplies from Asia..· Asia’s firmer prices so far in Q3 2025 and closed arbitrage to Americas could instead reflect extension of Asia’s unusually tight fundamentals since start of this year.· Completion of most plant-maintenance work in Asia raised prospect of rise in region’s base oils supply at start of Q3 2025.· Asia’s supply instead holds steady in July 2025 from previous month and falls for seventh straight month from year-earlier levels..· Low supply coincides with signs of firmer-than-expected regional demand at start of Q3 2025, provisional data shows.· Low supply and firmer-than-expected demand leaves supply-surplus unusually low in July 2025 for fifth time in six months..· Small surplus contrasts with expected rebound in net supply at start of Q3 2025.· Small surplus contrasts with actual rebound in net supply at start of Q3 2024.· Small surplus cushions impact of typical seasonal fall in lube consumption in month of August.· Small surplus curbs need to remove large volumes of supplies through shipments to more distant markets like Americas.· Small surplus also curbs pressure on Asia refiners to discourage flow of shipments from US to markets like India and Middle East.· Small surplus duly curbs downward pressure on US prices to keep open the arbitrage from US to India.· US export prices fall during Q3 2025, but size of price-drop only slightly outpaces lower feedstock prices.· Lower prices then keep open the arbitrage from US to India..· Supply and price dynamics could change in coming months when new production capacity starts up in Asia.· Even so, timing of expected revival in Asia’s surplus supply this year faces repeated push-back.· Any extension of that trend over coming weeks would provide valuable opportunity for US to clear more surplus supplies ahead of market-slowdown in Q4 2025..Global base oils margins outlook: Week of 8 September.Global base oils cargo flows: Week of 8 September.Asia base oils demand outlook: Week of 8 September.Base Oil News stories and analysis also available on ICIS platform
